Out There

net metering

Posted in politics by Pete on October 31, 2008

OK, this is going to be a doozy, and it’s been a long time in coming.  If you don’t care a whit about net metering, hit “page down” 25 times now (seriously).  I’ve participated at times in a discussion with the Regulatory Commission of Alaska (RCA) regarding possible new rules regarding net metering in Alaska.  The following is an exchange that I had with Bob Reagan, an executive from Municipal Light and Power (ML&P), an Anchorage electric utility.  Seeing the varying viewpoints on this single issue was really striking, to me.  I’ve meant to post this forever.  I meant to continue the discussion with this guy, but my summer graduate internship (all of June and July) followed by over 2 months of homelessness (well not really, but thats another story) got in the way.

I’m pasting our emails in here, but it can be very confusing.  Black is my original email, which Mr Reagan replied to in pink, which I replied to in brown, and then he replied to in bold pink. So as you read, you’re getting it out of chronological order, sort of backwards and forwards, if you know what I mean.  Leave comments with any questions if I’ve just totally confused you.

Mr. Schneidler – I also think this kind of dialogue is a good thing, but I am replying to you alone on this round just because I think the rest of the mailing list may be getting tired of it and think we are getting down into the weeds.  Feel free to distribute as you see fit.  I will use bold pink.  I hope it doesn’t look like shouting, but we are running out of good colors.

From: Peter Schneidler [mailto:schneidler@yahoo.com]
Sent: Wednesday, May 07, 2008 12:34 PM
To: Reagan, Robert (Bob) R.;
Subject: Re: Net Metering – RCA Workshop Comments

Thanks Mr Reagan for your comments.  I honestly appreciate the discussion and the search for truth.  I’ll make my responses in brown – I hope they are legible.  Black, blue, pink, and red have already been used.  : – )

Quoting from something I wrote near the bottom, clearly we’re agreeing to disagree here.  I see cheaper, cleaner power.  You see more expensive power that steals small but ‘significant’ amounts from my neighbors and does harm and gets in the way of large utility-scale projects.  But again I appreciate the dialogue as it is rare from people who apparently sit on opposite sides of an issue. You have correctly characterized this.
-Peter Schneidler

—– Original Message —-
From: ” Reagan, Robert (Bob) R.”
To: Peter Schneidler <schneidler@yahoo.com>;
Sent: Tuesday, May 6, 2008 6:28:30 PM
Subject: RE: Net Metering – RCA Workshop Comments

This is a reply to Mr. Schneidler’s reply.  I am using what looks like pink, on my screen. I will excise all parts of Mr. Schneidler’s document that I am not responding to.

From: Peter Schneidler [mailto:schneidler@yahoo.com]
Sent: Tuesday, May 06, 2008 5:18 PM
To: Reagan, Robert (Bob) R.;
Subject: Re: Net Metering – RCA Workshop Comments

This is a response to Mr Reagan’s email and a copy of the comments I sent Mr Gibson earlier.  Warning:  it’s really long.  : – )

Thank you Mister Reagan for your clarification.  That was my understanding as well, that the utilities, particularly MEA and ML&P were in flat opposition to net metering.  Regarding your closing statement:

“before diving into specific details, we should decide what we are trying to accomplish, and whether that objective justifies subsidies.  This issue gets danced around a little bit during these discussions, but I believe that Chugach believes, and ML&P certainly does, that the question should be answered rigorously before the discussion goes any further.”

Off the top of my head, aren’t we trying to get cheaper, cleaner energy? Having private citizens pay for the power generation equipment instead of public dollars is about as cheap as you can get.  And because of the long life of the equipment they even end up being a good investment for the purchaser.  And they’re much cleaner than the technologies they are displacing.  I’m no expert, but sun and wind seem pretty clean to me.  So doesn’t net metering match what we want?

This illustrates my point.  If we want cheaper energy, net metering will clearly be counter productive.  If it has any effect at all, it will cause cheaper energy to be displaced by more expensive energy.  Therefore, if cheaper energy is the only motivation, the clear course of action is to avoid net metering.

Can you explain your logic here?  I’m not trying to be combative, I’m truly not following you.  If I pay for my own renewable power-generating equipment, the public is getting energy from that equipment without paying any of the up-front cost needed to acquire it.  Delving into the math, suppose I spend $13,000 on a skystream 1.8 kw wind turbine purchase and installation that averages 400 kwh per month for 30 years.  That comes out to 144,000 kwh over what is supposed to be its maintenance-free lifetime.  $13,000/144000 kwh = about 9 cents per kWh.  Right now, the fuel cost for my village is 14 cents per kWh.  Since I’m paying for it, and since it produces power at 65% of avoided cost, how is it not cheaper?  Can you be more specific?

On the cheaper issue:  A utility doesn’t have any money that it doesn’t take from its rate payers.  Therefore, if the utility’s costs go up, it will charge more for its services (basically, power).  Net metering requires the utility to purchase energy from a rate payer that it otherwise would either produce itself, or purchase on the market (for those of us with access to a market), at a price that is necessarily higher than the cost the utility would otherwise incur.  (I say “necessarily higher” because the utility includes both cost of power and cost of the distribution function in the retail price.  The sum of power cost and distribution cost is always higher than the power cost.  In addition to that, the utility’s power cost is not just the cost of operating generation, it is the cost of owning excess generation in case it’s needed, and its the cost of running excess generation, in case it’s needed suddenly.  These are both costs that a net metering customer does not incur in its own generation.)  Another way of looking at this is that the utility charges its retail rate for firm electric power, delivered to the customer’s home (residential customer), at exactly the time that the customer wants it, in exactly the quantity that the customer wants.  The net metering customer, in contrast, delivers whatever power is convenient for the customer to produce, whenever the customer wants to produce it, at exactly the point that is convenient for the customer.  This is clearly a less valuable commodity than the one that the utility is providing, yet the net metering customer gets exactly the same price.  The exact amount will vary with circumstances, but there is always a subsidy.

Shifting the discussion to your numerical example, I won’t be exhaustive, but I will try to point out some defects in your analysis.  First, and most important, you are not requiring the utility to pay your cost for the power, you are requiring it to pay the retail rate for residential service, which I have pointed out includes a lot of services other than (in addition to) randomly generated kWh.  You are requiring the utility to pay you about 20¢/kWh.  Since (including PCE) the utility could otherwise acquire the same power at much lower cost, you are driving the utility’s costs and rates up.  Now, if wind turbines are actually cost effective, we have to assume that AVEC is smart enough to install them itself, in order to minimize costs.  If AVEC is not minimizing costs, that is a different issue, which should be dealt with by the members.

One more note is that your analysis ignores the time value of money.  The 144000 kWh of claimed electric energy is produced over a 30 year period, and if your discount rate is around 10% (very few individuals have a discount rate much below that) it costs you $1,300 in discount each year to own the unit, in addition to depreciation on the unit.  (I.e. you must either borrow money, or use money that you would otherwise use to make other investments or pay off debt.  Even though interest rates are often below 10%, there are other costs of borrowing, and risks you incur, which bring your average cost of capital well above your interest cost.)

On the other hand, if we want cleaner energy, and are willing to pay more for it, net metering for renewables might be a way to encourage it.  Then, the question becomes:  is net metering an efficient way to encourage renewable (i.e. clean) energy.  ML&P argues that it is not, while net metering proponents appear to believe that it is, but at least we could argue about actual, defined purposes, instead of simply assuming an agreement between effects and purposes that does not really exist.  It really would improve the quality of discourse if (assuming that anybody thinks otherwise) we established that a desire for cheaper energy is not a justification for net metering.  Then we can focus on issues where there might be more question.

I totally agree with your thought process here.  Obviously not your conclusions, but its a good start for discussion. I agree that we should establish IF a desire for cheaper energy is a justification for net metering or not.  I would think this would be a pretty simple matter of doing some sample scenarios from say 10 areas around the state, in each case using like 4 or 5 different levels of renewable generation.  This would give us hard numbers to refer to.  I also agree with your prior question, “is net metering an efficient way to encourage renewable (ie clean) energy.”  I agree that it would be helpful when forming policy to have an answer answer for both of those.

I do not think it’s necessary at this point to estimate quantities, as I believe that the theoretical issues are dispositive.  The reasons that I do not think that net metering is a cost effective means of promoting renewable energy are that (1) the subsidies it causes will encourage people to make uneconomic investments, which does nobody good except (maybe) the investor receiving the subsidy, and (2) it excludes all possible sources of renewable energy except customer owned sources.  A carbon tax, on the other hand, would give everyone an incentive, and if we get the level of the tax right, we will get the right overall response, including response from consumers.  By the way, some people think that the tax would be a cost (I am not accusing you of this error, since we have not discussed it) but it is not.  It is a transfer, and it could displace other taxes and be revenue neutral, or it could fund additional government services, depending on which we think is more important.

I was poking around on the regulatory policy standards of the State of Alaska and found 3 purposes explained there:

(1) conservation of energy supplied by electric and gas utilities;
(2) the optimization of the efficiency of use of facilities and resources by electric and gas utilities; and
(3) the establishment of equitable rates to electric and gas consumers.

I think it’s hard to deny that net metering would result in more clean, renewable cogeneration, resulting in a conservation of energy in the form of diesel or gas or whatever.

It is easy to deny that net metering will result in more cogeneration.  More to the point, it is easy to deny that net metering will be an effective (and, equally importantly, cost effective) means of increasing clean or renewable generation.  Certainly, if the discussion proceeds from uncritical assumptions like this, it will be very difficult to reach valid conclusions.

I’m confused again.  If you make a so-so investment more attractive, is it not reasonable that it will then be purchased more often?  In the case of the wind turbine and my local power costs and wind resource I’m always referring to, net metering would reduce the payback period from an estimated 19 years to about 13 years.  Please give me more data as to why you can easily deny that net metering will result in more cogeneration.

I was being a little flip on cogeneration.  In the utility world, cogeneration refers to a technical process where waste energy from one process (typically the electric generation process) is used as input to a different (non generation) process, like building heat, or some industrial process.  I guess a utility customer actually might install a very small cogeneration plant, and use the waste heat to heat a home or something, but you never hear of it.  What would be more typical would be a 10 MW to 100 MW combined cycle turbogenerator with a waste heat recovery boiler mounted on its exhaust, downstream of the heat recovery boiler, to produce hot water or low grade steam that is used to heat something, like a laundry or greenhouse.

On your more fundamental point, I agree that net metering might result in more renewable generation, I just do not believe that it is an efficient way to do it.  My basic problem is that as a program, it assumes a relationship between distributed generation and renewable generation that I don’t think exists.  I am not opposed to distributed generation that is also renewable, I am just opposed to particularly favoring distributed generation that is also renewable.  It is likely, in my mind (admittedly not certain), that every dollar spent on renewable distributed generation would be better spent on large scale renewable generation.

Secondly, utilizing the available wind and other renewable resources is clearly an efficient optimization of the available resources.

This may well be true, but why should we assume that the only way to use available wind and other resources is through net metering. I don’t make this assumption.  Actually, AVEC is putting up wind turbines all over the place these days and I think that is fantastic. It seems more likely that the best way to develop wind power is through utility scale developments, and that is certainly true of other renewable resources such as geothermal and hydro. I’m sure you’re right – a giant wind turbine is generally far more efficient that a little one.  I just think we should encourage BOTH individual and utility-scale renewable projects. As may have been clear from my response above, I agree with the idea of encouraging both distributed and utility scale projects, but being a market oriented economist, I think that the way to do that is to offer the same incentive to all renewable generation, and let the two types of project compete for the market.  Actually, I would go farther (again, as mentioned above) and offer a disincentive for non-renewable generation, in the form of a carbon tax, rather than an incentive for renewable generation.

Relying solely on outrageously priced diesel in places with constant, brutal winds seems to not live up to #2.

Again, that may be true, but it is not, in itself, an argument for net metering. You’re right.  Its just one part of my larger argument.

The third point is the one the utilities are clinging to.

I object to the phrase “clinging to”.  I really must stress that other than looking out for the rate payers’ welfare, the utilities have no real reason to be concerned about net metering.  If the RCA directs us to take money from our non net metering rate payers and give it to our net metering rate payers, we can do it.

OK, I apologize.  I guess I’ve been skeptical that such a passionate, united front would be only due to the utilities desire to protect rate payers from a few extra cents per year.  But I’ll take you at your word.  I’m sorry for that word choice.  I knew I’d probably make some wrong assumptions.

But the amount of rate disparity that might result from net metering has proven to be so small that this is a false argument, in my view.

This has been true, so far, only because the renewable distributed generation technologies are so expensive that few people are willing to install them even with the massive subsidies that result from net metering.  If their price ever gets low enough that a 300% subsidy is enough to make them profitable, they will start to have a very serious effect on rates.

Not if we cap the amount of cogeneration that can participate in net metering at some small percentage of total utility output. If you read the study I linked to below, that is their precise conclusion, that the key to price control is a low cap.  Secondly, in my case net metering would not be a 300% subsidy, it would take me from 14 cents/kWh to 20 cents/kWh, a ‘subsidy’ of under 43%.  This subsidy would help cover my up-front equipment costs, which is what much of the ‘subsidy’ the utilities charge is for as well. First, I should admit that I have been using numbers like 300% subsidy because those numbers are roughly what happens in Anchorage .  You are correct that they do not apply to AVEC, and they are also less true for Fairbanks than they are for Anchorage also (because there is no low cost natural gas in Fairbanks ).  So I yield to your numbers for your utility.  However, to me, this just means that AVEC, or at least some parts of it, is under real threat from net metering (because renewable energy is closer to being cost effective, but there is still a subsidy. What makes it dangerous is if net metered customers could actually profit by installing their own systems, because then a lot of them might want to do it.

Your suggestion that the risk can be mitigated with a cap on the amount is true, but it seems to me like an admission that a harmful subsidy is involved, so we have to limit the harm to a manageable level.  This is where my argument that a small harm is worse than no harm comes in.  On the other hand, if we can develop an environment where the renewable generation does not harm the utility (by which I mean its customers), then it doesn’t have to be limited, and we can have enough of it to make a real difference.  After all, if we limit net metering to, say, 1% of load, the most we are going to save on fuel is 1%, which isn’t going to do much for the environment.

With respect to your argument that the 43% subsidy you would get under net metering would cover your up front equipment costs, you should know that it is not the same as what the utilities are using the same money for.  The utilities are using it for all of the equipment that you do not have, like a distribution system, redundant generation, control costs, and spinning reserve.  ML&P’s retail rates would only be about 4¢/kWh if all we had to do is generate electricity at a constant level, and the customers came to pick it up at the power plant.

This link takes you to a short (5 or 6 pages) study done by the Maryland Energy Administration (presumably a bias-free branch of state government?) Who knows? Well, I just meant that it was written by someone in government, not by, say…greenpeace.

on what happened in Maryland when they first implemented net metering and the impact it had.  Most germane to this discussion is the part about how much it impacted the rate structure for the average customer (hint:  diddly-squat).

Again, that doesn’t prove anything until some renewable distributed technology gets within a couple of hundred percent of the cost of utility generation. Again, I admit that for you, the percentage would not be that high, but to me, that just increases the risk for AVEC

Either I don’t understand your objection or you didn’t understand the study. I’ll admit that I haven’t even read it They used a utility worst-case scenario in their models, making hypothetical projections that 100% of the possible net metering cogeneration (up to the cap What is the cap?) would be used.  So the real-world cost of the technology is irrelevant.  Their projection assumes that everyone would immediately want to rush out and set up their own solar system, and if they did and went all the way to the legal maximum, how would that affect the other rate payers? I just have to return to the theoretical point that if utilities have to pay for power 7¢/kWh (in the case of an urban utility) more than it would otherwise cost, the extra cost has to be extracted from the rate payers, one way or another.  How much money it is depends on how much net metered generation there is.  However, if it isn’t much money, then it isn’t much generation, and if it isn’t much generation, it isn’t doing much good.

The nation socially & politically is becoming more and more sympathetic to net metering due to energy shortages/prices and increases in environmental consciousness or concern about global warming.  Here in Alaska there isn’t maybe as much general concern about the environment, but there is a fuel crisis that everyone is talking about.

Again, a desire to shift our reliance to less costly or harmful generation technologies is not a reason to favor net metering.  There are much, MUCH better ways to achieve that goal. I guess my point is we should pursue all avenues toward that goal. I differ only slightly.  We should consider all avenues, then choose the best one, or the best mix.  If distributed generation turns out to be part of the best mix, great, but it should be chosen based on the economics (with appropriate consideration of the external costs, such as CO2 production.)

Anyway, my point with that is the utilities would be wise to strike a compromise in their favor now and get it cemented in place.

Again, note that it will not be the utilities that will be harmed by net metering.  It will be their rate payers.

Instead they are taking a hard line to gain a temporary victory, but I think they’ll eventually regret it when they’re forced to swallow something that is a greater imposition a few years down the road.  Of course that is only hypothetical, but risk management is a part of running any business.  If you look at the attachment I sent that includes a listing of states and their net metering policies as well as a national net metering map, it seems clear which way the momentum is moving on this issue.  The fact that utility representatives in the Anchorage RCA meeting came out and said point blank “This is not a negotiation” shows that they feel they are dealing from a position of strength on this issue.

I have no idea whether we are dealing from a position of strength.  That is beside the point.  The point is that you do not decide what the truth is by voting on it or compromising on it.  Truth is discovered.  Of course, if we do not care about the truth (i.e. the possibility of harming people with ill conceived policies does not bother us), then we are free to compromise.  Maybe we will end up compromising because we cannot discover the truth, but I think that we will be better off if we at least make some effort first.

I’m all for the truth!  Actually that’s why I’d stink as a politician, I have a hard time compromising my values, which to some degree is essential in politics.  I agree we should endeavor to have as many facts, and as much truth, as possible.  But remember that people can have more than one perspective on some truths.  But I totally agree with the heart of what you say here. Agreed, and we may be similar in that regard.  Many of my utility colleagues blanch when I start talking about “truth”, but I think that it is only through looking for the truth that we make progress.

I’m just a teacher in the bush, but it seems obvious to me that they’re wrong about that.  I think net metering is coming one way or the other, and better for them to have a say in its design.

As a rate payer, you should want us to have a say in the design.  You should also want to understand what we are telling you about the economic effects of the concept.  I will repeat that if “profit” were our motivation in trying to make these points, we wouldn’t bother, because we really will get the money we need either way.  It is just a question of what happens to (to use your phrase) Joe Consumer.

Hope I haven’t gotten anyone too upset.  I’m sure I’ve made some wrong assumptions about how the utilities think or how electricity works for that matter, and to the extent that is the case, I apologize.  This is NOT my field of expertise, I feel like Joe Consumer just trying to put in my $.02.
Thanks for listening.
-Peter Schneidler
Kasigluk , AK

PS – I sent in my comments to the 5 original questions a few days ago directly to Mr Gibson.  Here they are if you’re still reading this.

  1. • Should this agency encourage the development of distributed renewable generation in Alaska through net metering or some other medium? If so, what realistic benefits could be achieved through net metering?

Yes.  It’s hard to say on the benefits.  I’m sure the benefits will be small at first, very small.  But the bottom line is we have an energy crisis in most of the state, and we have people who want to pay their own money to develop clean energy and help grow grid capacity.  Over time with advancing technologies and the long life of some of the equipment put in place, there will be a benefit.  Just because something is small, if its right, you should still do it. (I have made the opposite point several times.  Just because something is small, if it is wrong, you should still not do it.) To say that the need is too great and this solution is too small so we shouldn’t do it, thats a dumb argument in my book.(I don’t think anybody has made that argument.  My argument is that net metering will actually be harmful) Someone in the meeting (the MEA guy?) said something along the lines of if lots of people do net metering it will mess up the grid by introducing too much power that fluctuates too much, and if hardly anyone does it then why bother? The MEA guy was Jim Walker.  He may have said that, or I might have, but my approach would be a little different.  A generation system has to be actively controlled, so that voltage and frequency are maintained at the nominal levels, and so that the individual generators work together, rather than competing with each other.  So, if there are a lot of uncontrolled generators on the system, it increases the control burden on the generators that are part of the control system, which increases the cost.  This is just one of those services that I claim net metering customers would receive but not pay for.  At some point (I would guess 20% or so of connected generation, but I am not a professional in that field) it would become impossible to control the system, but to me, it is more of a cost issue. Yes, the state should support utility-grade public renewable power generation projects.  Yes, we should conserve, especially in the railbelt.  But if people want to pay for it and its clean and up to standards, why stand in their way? We agree on this, but isn’t that what the SNAP program is all about? Yes it is, but lets also open up the way for more people to pay for their own cogenerating equipment, particularly in areas where few people might participate in a SNAP program. You already know this, but my objection is that net metering also forces other rate payers, who may not agree, to contribute, and in some cases, might force them to pay the entire cost, or even more than the entire cost (which is where the cap would absolutely be hit, and where you might start getting customers excluded by the cap fighting for the right to participate).

  1. • Should any distributed generation incentive like net metering be limited to electricity generated from renewable resources?

Yes.  To me the idea of net metering accomplishes 2 things.  1 is a practical matter of balancing out the highs and lows of an inconsistent power source like the sun or wind.  By spreading it out over a month, 2 months, or a year, it is much more practical for the consumer. (but only because the utility performs the costly service of balancing out the highs and lows, at no cost to the particular consumer receiving the service, but at significant cost to other consumers) True. A diesel generator is not like that.  It is very consistent, and doesn’t need that period of time to smooth out the peaks and valleys of electrical generation.  #2, net metering is generally regarded as an incentive for clean power production, as a nod to those concerned about global warming.(however it is regarded, it is not an effective means of encouraging clean power production) I expressed my confusion about this already above. I don’t care that much about this one way or the other, but that’s my opinion.

  1. • Should a regulation be implemented to require electrical utilities to offer a program similar to Golden Valley Electric Association, Inc.’s (GVEA) Sustainable Natural Alternative Power (SNAP) Program?

probably not.  Seems like its a required program you’re pushing on the utilities, its like all of the bureaucracy of true net metering without the real benefits.  And the areas that most need it are areas of great poverty, where people don’t have much $$ to give to that stuff.  If we’re going to compel the utilities to do something, lets have it be the real thing.

It is ironic that your concern for areas of great poverty where people do not have much money to waste would lead you to advocate that they we compelled to spend significant amounts of it on distributed generation that is unlikely to be as cost effective as utility scale generation, renewable or otherwise. What is significant?  50 cents a year?  25 cents?  A dollar?  In the next paragraph you agree that the total rate distribution would be something significantly less than 1% (assuming a 1% cap on renewable cogeneration).  This gets back to my earlier point about the helpfulness of some real-world examples that would give us the $$ figures we’re actually talking about.  Maybe we could agree on a neutral 3rd party to draw it up? I think that there are so many variables that real world examples that have wide applicability are hard to develop, but I think your understanding of the numbers is in a reasonable range.  My real objection is that I think net metering causes investments that are not economic, and I don’t think that customers should be forced to support such investments at any level.  Obviously, utilities sometimes make mistaken investments, but sometimes they get punished for such mistakes by the RCA refusing to allow them to recover “imprudent” investments in their rates.

  1. Is there an overall generation capacity threshold at which net metering would have a negligible effect on a utility’s rate design?

Obviously.  We could limit it to .00000000001% of total capacity and the rate’s wouldn’t move an inch. (agreed) There I go being literal again.  But I think there is a totally acceptable middle ground.  How about a total renewable production cap of 1% of peak demand?  Would this not result in a maximum theoretical rate redistribution of 1%?(true, but if net metering is, as we contend, harmful, why would we want any harm at all?) And this only if renewables are maxed out for that utility, something totally unlikely to happen for many years.  And actually it would still be less than a 1% rate redistibution because as it stands now you already have to pay the avoided cost, so its the difference between the avoided cost and the retail rate, for a max of 1% of your power.  This is a SMALL amount. (all of these points are granted, but a small harm is still worse than no harm) We tax for things as a society that we think are worthwhile.  Like schools, roads, clean air, you name it.  I get a bit of a kick out of listening to the utility bigwigs bemoaning the injustice of it all. (Actually, ML&P has no problem with taxes, and is on record favoring carbon taxes, which are clearly the most effective (and cost effective) program for reducing carbon emissions.) Interesting.  I didn’t know that. It is a position that some people (including many utility people) find radical, but I think that it is the only governmental response that has any hope of having an adequate effect, and I also argue that for any given reduction in carbon emissions, it is by far the lowest cost.

Net Metering Scenario:
Let’s suppose I use an average of 500 kWh per month, and generate an average of 400 kWh per month.  With net metering I would pay for 100 kWh.  Kasigluk’s retail rate is .46/kWh, less the PCE adjustment of $.26 = $.20/kWh, so 100* $.20  = $20 is what I would pay them.

Current Federal avoided-cost scenario:
I get a check from AVEC (utility) for 400 * $.14 (their fuel cost per kWh) = $56.  Then I turn around and pay AVEC for 500 * $.20 = $100, so 100-56 = $44 is what I would pay them.

The difference between these two scenarios is net metering puts $24 in my pocket instead of AVEC.(which means that AVEC must take the $24 out of the pockets of its other members) Yes, see below. Also, my 1.8 kw system would represent about 1/3 of the total possible renewable generation for my village (if we put the max at 1% as I mentioned earlier), so there is no way this could get out of hand, financially, for AVEC.  That $24, if spread over the ratepayers of Kasigluk and Nunapitchuck (we’re connected via electrical intertie) would be something like two cents per person per month.  In exchange for less diesel being barged in and belched out into the air.  And it could hardly go higher, that’s the key, is capping it at a fairly low % of utility peak loads.  So I guess its a question of values, what is important, and what is fair.  I don’t think that scenario sounds like a grave injustice to the average person, especially not in more liberal Anchorage which can carry a vote in Alaska single-handedly, much like King & Pierce counties in WA state.  The utilities can be stubborn now and hold the line.  All they’ll accomplish is a delay and bad PR.(all of this misses the point that net metering will always do more harm than good, at any level.  If it doesn’t do much harm, it is guaranteed to do even less good.  The victims will not be the utilities, they will be the rate payers.) Always?  You sound like your mind is irrevocably made up. This is one of those areas where I don’t think it’s a matter of deciding anything.  I think it is an inescapable economic outcome, whether we like it or not.

The real questions, as became obvious in the meeting, is what to do with excess electrical generation?  Is it paid for?  At what rate?  Is it averaged against consumption?  If so, for what time period?  State after state now has laws that pay the customer the retail rate, and they allow excess to carry over for 12 months, and even then some states mandate that the utility then must pay for any extra at that time.  Surely there is room for compromise and risk-avoidance here.  We can put caps on the amount of power utilities would have to buy, or on the amount they’d have to pay as a % of avoided or retail, there are a lot of variables we can play with to find something everyone can live with even if noone loves it. (compromise is always possible, but there is no way to compromise the fact that small harm is worse than no harm.) Clearly we’re agreeing to disagree here.  I see cheaper, cleaner power.  You see more expensive power that steals small but ‘significant’ amounts from my neighbors and does harm and gets in the way of large utility-scale projects. Agreed

By the way, I have a wife and a daughter and my taxable income in ’07 was under 30k.  The name-calling type of arguments employed by the MEA and ML&P guy that this would be a toy for the rich and noone else are condescending and annoying.  The skystream 3.7 would cost nearly half of my taxable income.  If I want to do the right thing, and I care enough about it to sacrifice, does that make me a bad guy? (if you want to do the right thing, and you think that the right thing is to install a skystream 3.7, why do you think that your neighbor should be forced to pay for it?) Nice one!  I appreciate a good zinger.  I guess I think my neighbor (and even myself if I don’t put a turbine up which is likely) can be reasonably compelled because the price is so small.  If my neighbor pays $100 in a electricity bill, and 2 cents are from me, we’re talking about 1/5,000th of his bill being from me. I would agree with you if I thought the benefit justified the cost, but for reasons that I hope I have explained above, I don’t.  I also hope you understand that I agree that we need a major and fairly rapid shift away from fuel burning for all forms of energy, so it’s not a question of green or not green, it’s a question of what policy gives us the most results for the least cost.  This is also where I might be forced to accept the idea of subsidies, even though I think they are a poor second best solution (second to carbon tax) because nobody seems willing to consider the tax. I’m not trying to boast here, I only bring it up because they did, trying to make it an issue of income or classism.  Meera Kohler did too in her AVEC newsletter of Feb 08, 5th paragraph.

Its now 3:30 am, and because of a final I wasn’t able to complete until 1:30 I haven’t been able to give this the attention it deserves and that I wanted to give it.  This will have to do.  I hope you’ll read all this and put my views in what you write up.  I understand there are hugely conflicting viewpoints on this and your document will not mirror mine!  I hope we get to see what you’re going to submit, then all parties can either “sign” it or disavow it and submit their own thing.  I think we have a right to that process.  Thanks for taking on this job Mr Gibson.


SO, after all that, what do you think?  Was this guy just being obstructionist or is he making sense?  It’s almost like a republican/democrat philosophy difference thing, to me.  When is it ok for the group to be ‘taxed’ for a benefit that is open to everyone but will only be undertaken by some who want to buy in hugely up front?  And if the answer is “never” my reply is “even if the tax is like 10 cents per year?” and you could have the benefit too if you took the initiative?  Funny how much the exchange veered toward big themes like Truth, right & wrong, etc.  Hard to believe that this dude could argue with so much passion about it based on principle.  Aren’t there a lot more things wrong with the world than this so-called potential “subsidization?”

Finally, let me put up an exchange between the Interstate Renewable Energy Council (IREC) and Mr Reagan.  This exchange was piggybacked onto one of my earlier exchanges with Mr Reagan and it is also informative of the differing views.  While I wrote as “Joe Consumer,” Mr Keyes of the IREC writes as more of a knowledgeable advocate for net metering.  Keyes wrote in BLUE and Reagan replied in RED.

I am replying in black (interleaved) to Mr. Keyes, with whom I agree in part and disagree in part.


I considered adding green comments to the string below, but its already quite a jumble.  Instead, here is the basic position of the Interstate Renewable Energy Council:

Net metering of renewable generation is essentially the same as conservation with respect to rate impacts and environmental impacts.  The only substantive difference is that conservation never causes energy to feed back to the electric grid.  In both cases, a customer is consuming less power from the grid and fixed utility costs are being spread over fewer kWh sales, having a very, very small impact on rates (possibly offset by reduced utility peaks).  In both cases, fairness would dictate that the customer should not have to pay as much as he did before, because he’s using less than he did before. I agree that both customers reducing demand through “conservation” (which I put in quotes only because to me conservation is not a new activity.  It is simply the traditional practice of consumers trying to avoid wasting the product they are buying) should pay less than they did before.  It is not true, however, that net metering is the same as conservation with respect to rate impacts.  The primary difference is in demand characteristics.  A conserving customer can only reduce energy consumption when he/she (hereinafter “it”) is using energy.  Therefore, there is unlikely to be an increase in variability, which is what drives cost/kWh.  In addition, conservation measures tend to be very reliable from moment to moment.  They generally do not rely on a machine continuing to function, or the sun continuing to shine, or the wind continuing to blow.  Conservation, therefore, while it may cause a short term increase in cost to serve due to lower sales, tends in the long run not to increase cost to serve, because the utility does not have to build or operate capacity (generation and transmission/distribution) to pick up the load when the customer’s generation stops generating.  This difference can be quite important.  Consider a net metering customer that generates, on average, the same amount of energy as it consumes.  That customer would pay nothing other than the nominal customer charge ($6.56/month, in ML&P’s case)  but would receive benefits and impose costs vastly greater than that.

For both renewable generation and conservation, the wisdom of the customer’s actions are beside the point. I would agree with this if the customer is not seeking a large subsidy.  Net metering customers are getting a big subsidy, and it is not beside the point if one customer has to pay for another customer’s unwise actions. If my neighbor sets his thermostat at 50 in the winter and wears a parka around the house, I’m not going to follow his lead, but I won’t begrudge him his right to a lower utility bill. Nor would I. Likewise, if he wants to spend $25,000 for solar panels that reduce his consumption by a few hundred dollars per year in Alaska , I may think that’s not an economic choice, but I won’t expect him to pay for the consumption that he meets with his own system. I wouldn’t either.  I would, however, expect him to pay for the services he expects from the utility. Also, just as a utility would not attempt to stop a large commercial customer from conserving an average of 100 kW, there is no reason to prohibit that customer from installing a 500 kW wind turbine that averages 100 kW of generation. There, we differ.  A utility would applaud a commercial or any other customer for conserving an average of 100 kW.  If it installs a 500 kW wind turbine that averages 100 kW, the utility will be happy to buy the output for what it is worth.  But the utility should not buy the output for 7¢/kWh more than it is worth because it would have to take that $63,000 per year from its other customers.

The argument that the customer should pay for the service of feeding back to the grid is based on the fact that the customer is enjoying a benefit, but there is no related cost for the utility. That statement is absurd.  In order for the customer to feed back into the system (or take service from it), the utility must build a system.  The system will have capacity costs that are driven by the maximum loads that the customer is likely to place on the system, and it will have control costs that may actually exceed what they would have been without the net metered generation.  Customers pay the utility for these costs through their bills for service.  If customers force the utility to incur these costs but reduce the metered service in a way that reduces the utility’s recoveries by more than it reduces the utility’s costs, those customers are no longer paying for their share of the costs that were incurred on their behalf.  This is a cost that will be borne by the other customers. The excess power is reducing the demand on his distribution circuit, which doesn’t hurt anything and is helpful when coincident with peaks. It is conceivable that some net metered generation would have output profiles that were helpful to the utility, in which case the output is more valuable than if the profile is not helpful to the utility.  However, this is not California , and it is hard to think of which renewable resource could be expected to exhibit that characteristic in Alaska .  In any case, ML&P repeats that it is willing, and even happy to purchase renewable generation for what it is worth, whatever that turns out to be.  We simply do not assume that it is worth as much as retail electric service.  If it were, there would be no need for electric utilities.

Finally, a key point that hasn’t been discussed is that distributed generation could become the most economic choice in the near future, leading many customers to self-generate. This is, indeed, possible, although not likely.  If it does become true, there is no reason why utilities would not welcome it.  They still will not want to pay more than the distributed generation is worth, and that is still going to be some form of wholesale price.  It simply cannot equal the retail price in a world where utilities still serve any function. Several of the largest solar module manufacturers are very publicly claiming that their installed costs will be half of current levels in four years.  At the same time, it is quite possible that natural gas prices will continue to rise.  The next few years are the time for utilities to familiarize themselves with interconnection of distributed generators and develop metering and billing protocols. Something I may have missed in this discussion is the connection between distributed generation (especially net metered distributed generation) and renewable generation.  When solar power becomes cost effective (surely it will happen in the desert southwest long before it happens above 60 degrees latitude), why would utilities and large scale independent power producers not develop it at large scale, and why should it be assumed that installation of micro-scaled uncontrollable systems by customers will be the economically most efficient way to develop it? It will be much easier for utilities to do this now, when there are only a handful of early adopters interconnecting. In any case, I think the utilities are at least willing to develop efficient ways to purchase the output of distributed generators, but the purchase should be at a reasonable price.

Thanks for your time, and like others, I applaud the civil discourse here.  I suggested at the workshop that IREC’s model rules could be used for a template, so a word copy is provided here for Mr. Gibson’s use, if he would like to use it.


Jason B. Keyes
Wilson Sonsini Goodrich & Rosati
701 Fifth Avenue, Suite 5100
Seattle, WA 98104-7036
direct: 206——-


Phew!  Told you this would be a doozy.

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Posted in Uncategorized by Pete on October 31, 2008

I keep hearing such doubletalk on the question of which presidential candidate will raise taxes the most.  The bottom line is that Obama will increase taxes on the richest folks, and reduce the tax burden on the majority of us.  McCain and most republicans feel this will stifle investment and lead to net job losses and make things worse for all of us.  I’m not trying to endorse one or the other, but when I hear out and out lies on the radio it drives me nuts.  Do your homework.  Google “McCain Obama tax plan comparison,” decide which you favor and vote accordingly.  Don’t buy the soundbites.  There are lots of independent analysis pieces online, like this one or this.

Similarly, I’ve heard Obama talking about how if the Republicans had privatized social security how we’d all be up a creek now.  Well…sort of, but not really.  A half truth is a lie, as far as I’m concerned.  Especially when the motive is self-interest.  Half truths tend to be damaging  due to the sliver of truth and ring of authenticity that they carry.  The deceit knows no party or political boundaries, and man it gets old.  “You say you wanna find a place where people are not lying…if you find a place like that, I’ll go there too!”

my gen-x response to uncle ted and politics in general

Posted in politics by Pete on October 31, 2008









Quoting the ADN, which is quoting the National Review:



Final quotes from the article quoted earlier:





